Employees offered group plans without hospitalization coverage eligible to use advance tax credit subsidies for exchange plans
Employees offered employer-sponsored health plans without coverage for hospitalization are eligible for advance tax credit subsidies for individual coverage in the state health benefit exchange marketplace, according to Internal Revenue Service guidance issued this week.
Notice 2014-69 clarifies that such plans do not provide minimum actuarial value (MV) covering 60 percent of expected health care utilization costs, which entitles employees to use tax credits toward the purchase of qualified health plans (QHPs) sold on the exchanges. It also notes regulations will be promulgated by the IRS and the U.S. Department of Health and Human Services formalizing the guidance.
The Departments believe that plans that fail to provide substantial coverage for in-patient hospitalization services or for physician services (or for both) (referred to in this notice as Non-Hospital/Non-Physician Services Plans) do not provide the minimum value intended by the minimum value requirement and will shortly propose regulations to this effect with a view to being in a position to finalize such regulations during 2015 and make them applicable upon finalization. Accordingly, employers should consider the consequences of the inability to rely solely on the MV Calculator (or any actuarial certification or valuation) to demonstrate that a Non-Hospital/Non-Physician Services Plan provides minimum value for any portion of any taxable year ending on or after January 1, 2015, that follows finalization of such regulations.
While large employers are subject to a penalty for each employee who uses advance tax credits to purchase an exchange QHP, the guidance waives the penalty if a large employer began enrolling employees in a group plan that does not offer hospitalization coverage prior to the November 4, 2014 date of the guidance and who relied on the MV calculator to determine if their plans provided minimum actuarial value. The guidance adds that the regulations, when issued, will not apply to plans that were effective prior to March 1, 2015.
Under the guidance, employers offering plans without hospitalization coverage must correct notifications issued to employees that such plans preclude employees from obtaining premium tax credits for the purchase of exchange QHPs.
Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email